In today's post, we will talk about Dropshipping. For all those who are thinking about setting up an e-Commerce, or for those who already have it, or just for the curious who wonder what that is.
Setting up a store may require a large initial investment. Above all, because you have to make the products you want to sell. And, if later, the store does not succeed, it is an investment made for nothing. To avoid this, the dropshipping. An online sales technique in which the seller saves this investment.
We tell you what dropshipping is, how it works, its advantages and disadvantages.
What is the dropshipping
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Dropshipping is an online sales technique in which the seller offers products that he does not have in his facilities. The seller who uses this technique is really an intermediary between the customer and the wholesaler.
Therefore, the seller of the e-Commerce contacts the wholesaler, and the latter sends the product to the customer in question. Product that is not in the retailer's stock.
Its literal translation of English is that of "sales triangulation". It is a sales system in which three players are needed: the customer, the intermediary and the wholesaler.
How does it work
To begin with, you must create an online store and be clear about what products you want to sell. To do this, you contact a manufacturer or a wholesaler who is willing to give your products to be promoted on our website.
Once the conditions of sale, shipping and expenses with the manufacturer are clarified, it would be appropriate to sign agreements. In this way, problems are avoided in the future.
Afterwards, the manufacturer's products are displayed on the e-Commerce website. The customer can add them to the shopping cart online, and buy them. The seller and the wholesaler receive a notification, and it is the wholesaler who is responsible for finalizing the order: prepare the package and send it.
It must be clear that the important thing is to sell. So you have to play with creativity. Online stores there are many. That is why it is essential to offer a good product, and sell it well. That is attractive, and that the customer prefers to buy it in your store and not in any other.
For now it sounds very good. And it is a sales model that gives us many advantages. Although later we will also name its drawbacks and the way to solve or mitigate them, we will start with the positive side.
First, what has already been said: little initial investment. By not having to buy the products, the investment will be negligible. The expenses that can not be avoided are those of web domain, page design, and positioning on the Internet. For this, you have to contact or learn to manage SEO and SEM techniques, so that Google recognizes and indexes your content, and does not get lost in the huge sea of existing information.
There are also much less management related to logistics issues. There is no need to prepare packages or deliveries. All this goes hand in hand with the wholesaler.
By not having a physical store, there is a large reduction of fixed expenses. There is no need to pay rent, electricity costs, etc.
Nor will there be hire a lot of staff There is no own warehouse, no office to manage it. You really need a person who knows how to run websites, a content editor and SEO / SEM positioner. And, in many cases, it can be the same person. It depends on the expansion of your e-Commerce.
As a summary, we can say that reduce all responsibilities. There is much less fear of losing everything. To some bad, that the business does not succeed, you have lost time and investment of the website.
More or less, I imagine that you have been doing to the idea of the disadvantages of this online sales technique. And if not, we'll summarize them.
The biggest disadvantage, according to Followers Online, would be the lower economic profitability The profit margin is lower.
We can not forget the overwhelming number of competitors in the current online market. Almost everyone has bought online today, so people are starting to trust this new market model. That is why thousands of online businesses have emerged. And, who has a physical store, the safest thing is that they also sell online.
Another problem that we face is the increase in Shipping costs. If we choose many suppliers for our e-Commerce, the customer will have to pay shipping costs from several manufacturers. That is, if you choose a product from a supplier X, and another product from a supplier Y, there will be double shipping costs, and it is more likely that the customer will back out. Therefore, sometimes it is to have fewer suppliers and fewer products, but that these are quality and reliable. Because, otherwise, it would also increase the Delivery time. Or, in some cases, the products would arrive separately.
Problems related to the provider They can give us headaches. If there is an absence of communication with them, we probably do not have real awareness of what is happening in that phase of dropshipping. So, we have to make sure that the product is being delivered on time, and that it is of good quality. If not, the client will stop trusting us. And, in the online market, the client's trust in us is the most important thing. If, in addition, the supplier wants to add his name to the package, the client, upon receiving it, will be confused. Therefore, it is a good idea to make it clear to the provider which name should appear (it is normal to see the seller's, the web's).
To save you problems, it would be appropriate, before starting to work with this supplier, to be clear about the shipping conditions (the packaging, the shipping time, the expenses, the decoration, the name that appears on it).
It is also important that the provider is legit There are cases of scams, in which we think that the wholesaler is doing his part of the work, and no. In the end, the one who faces the customer is the seller.
Solutions to the problems that dropshipping can cause
- As we said, you have to clarify everything with the provider. To save the customer's discontent, and for the product to be consistent with the brand.
- You have to offer as much information as possible about what is going to be sold. This will give the client more confidence. Your business depends on your relationship with the manufacturer, so try to work with the one that best suits the line of your company, your way of working.
- As we have mentioned before, there is a big competition problem. Then, excel! Make your product innovative, original and powerful. Even if you're selling the same thing as hundreds of others, give it a value added. Send a poem attached to the product, give them a personalized treatment, offer them a unique service. Whatever you think that differentiates you and want to buy from you and not from others.
- To get customers to notice you, give importance to SEO, to web positioning. Create a blog associated with your website and write good content. Invest in SEO and social networks. Generate interesting content to the reader, so they subscribe to your website. It is what is known as content marketing It is the way we have today to look for information, to seek comments and opinions about stores. All this must be foreseen before starting the project, but it is never too late. If you already have your online store and you think you do not have the results you would like because it does not reach the potential audience, then your digital marketing strategy is not working.
- So that you do not open an online store in vain, that lasts two and a half months, study the profitability of what you are going to sell. Do a market study, this will make you see if your product is sued or not. This preliminary analysis will guide the way of your company. In addition, you can start with a dropshipping business as an outpost of a physical business in the future.
- It helps that your business it is interesting and attractive In this way it will make it much more fun to work with him, and people will see the interest reflected in the web. After all, it's a job where you're going to spend many hours, so it's much better that you like it.
- Use Google Shopping at first, because it can give you a boost in the first months. These are the investments you have to make in order for your e-Commerce to go ahead and be known by the public on the web.
How much money is earned?
Why are we going to lie? If we want to set up a store it is because we want to make money. A lot, little or whatever. But we need economic results from our efforts.
Do you earn a lot using Dropshipping's online sales techniques? Your earnings, to be honest, depend on your ability to sell and negotiate. Both with your supplier and with your client. In the end it is a sales triangle.
Most retailers are winning between an 20-50% profit margin. All that you have to negotiate with the wholesaler before starting to sell. They should not forget that you are also helping them to market their product. Your online store will be a window to the market for them.
It is important to know that small and cheap products, in the long run, come out more profitable. Why? Because the customer is not going to claim something that cost 1 or 2 euros, but a phone 200 euros will claim it and will endeavor to get the return.
How to get suppliers
Everything sounds very nice and very easy, but when it comes to the truth how to find dropshipper without crossing with scammers? It's difficult, and you have to have patience. For starters, if you are asked for an installation fee or a monthly fee, be suspicious. Wholesalers should not ask you for this. It is also true that, probably, the first provider is not your final provider. You will have to try until you find a reliable provider. Trial and error.
And, where do you get suppliers?
Well, from contacting manufacturers and wholesalers, and ask them if they are interested in having another screen to sell their products. Or copying the competition (it seems creepy, but it is very effective). If the competition does well with those suppliers, investigate. Attend industry fairs where you will meet the people behind the industry that interests you. Or, most common and comfortable, look for a list of dropshippers on the web and contact them.
What should providers ensure?
To begin with, you have legal capacity to sell the product and have the relevant licenses. Also, that you guarantee the delivery terms stipulated, and that you will comply with the return policy. And that is willing to maintain a constant communication with you. If you are not quick to answer, do not take your calls or avoid you: distrust. This will be done by assigning you a sales manager with whom you will have direct contact.
Best known providers
Surely you know them and do not know that they are dedicated to dropshipping. Or simply, you did not know how to name what they did.
Do you know AliExpress.? This Asian giant is the best known. From 2012, dominates in its sector. From footwear to electronic products. Sell wholesale products for online stores and for individuals all over the world.
Miniinthebox: This dropshipper distributes electronic products to online stores throughout the Spanish geography from 2010.
BigBuy: This Spanish company distributes business gift products. Their products are original, as well as their idea to unify in a same directory a list of gifts of the companies.
Other legit providers that you can study as options for your store are BangGood, Nedis, PandaHall, DealExtreme, Tmart, DHgate and SheInside.
Conclusions Dropshipping: what it is, its advantages and disadvantages
We can say then that Dropshipping is a new online business model in which there are three players: the retailer (who has a web page where he exposes the products), the wholesaler or manufacturer of products and the customer. There is much less initial investment than in a traditional business, but finding a reliable and compliant provider is more difficult. Profits are not as profitable in the long run, but are offset by the few risks of loss.
So far today's post. We hope you have been interested, and if you have anything else to add or any questions to ask, leave us a comment.